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Tuesday, 11 August 2009
Page: 4475


The ACTING DEPUTY PRESIDENT (Senator Ryan)—Pursuant to standing orders 38 and 166, I present documents as listed below, which have been presented to the President, the Deputy President and the Temporary Chairmen of Committees since the Senate last sat. In accordance with the terms of the standing orders, the publication of the documents was authorised. In accordance with the usual practice and with the concurrence of the Senate, the government responses will be incorporated in Hansard.

The list read as follows—

(a) Committee reports

1. Economics Legislation Committee--Report, together with the Hansard record of proceedings and documents presented to the committee--2009-10 Budget estimates (received 25 June 2009)

2. Select Committee on Regional and Remote Indigenous Communities--Second report, together with the Hansard record of proceedings and documents presented to the committee (received 25 June 2009)

3. Rural and Regional Affairs and Transport References Committee--Final report, together with the Hansard record of proceedings and documents presented to the committee--Matters specified in part (2) of the inquiry into the management of the Murray-Darling Basin system (received 25 June 2009)

4. Rural and Regional Affairs and Transport References Committee--Final report, together with the Hansard record of proceedings and documents presented to the committee--Import risk analysis for the importation of Cavendish bananas from the Philippines (received 25 June 2009)

5. Report on meeting of OECD parliamentary budget officials, Rome, Italy 26 and 27 February 2009 (received 25 June 2009)

6. Select Committee on Agricultural and Related Industries--Second interim report--Pricing and supply arrangements in the Australian and global fertiliser market (received 30 June 2009)

7. Rural and Regional Affairs and Transport References Committee--Final report--Meat marketing (received 30 June 2009)

8. Joint Standing Committee on Foreign Affairs, Defence and Trade--Report, together with the Hansard record of proceedings and submissions received by the committee--Australia’s relationship with India as an emerging world power (received 7 July 2009)

9. Economics Legislation Committee-Interim report---National Consumer Credit Protection Bill 2009 and related bills (received 28 July 2009)

10. Economics Legislation Committee--Interim report--Corporations Amendment (Improving Accountability on Termination Payments) Bill 2009 (received 28 July 2009)

11. Education, Employment and Workplace Relations Legislation Committee--Report, together with submissions received by the committee--Higher Education Support Amendment (2009 Budget Measures) Bill 2009 [Provisions] (received 5 August 2009)

12. Community Affairs Legislation Committee--Report, together with the Hansard record of proceedings and submissions received by the committee--Fairer Private Health Insurance Incentives Bill 2009 and related bills [Provisions] (received 5 August 2009)

13. Community Affairs Legislation Committee-- Report, together with the Hansard record of proceedings and submissions received by the committee--Health Insurance Amendment (Extended Medicare Safety Net) Bill 2009 (received 5 August 2009)

14. Community Affairs Legislation Committee--Report, together with the Hansard record of proceedings and submissions received by the committee--National registration and accreditation scheme for doctors and other health workers (received 6 August 2009)

15. Legal and Constitutional Affairs Legislation Committee--Interim report--Migration Amendment (Immigration Detention Reform) Bill 2009 (received 7 August 2009)

16. Legal and Constitutional Affairs Legislation Committee--Interim report--Personal Property Securities Bill 2009 [Provisions] (received 7 August 2009)

17. Community Affairs Legislation Committee--Report, together with the Hansard record of proceedings and submissions received by the committee--Therapeutic Goods Amendment (2009 Measures No. 2) Bill 2009 [Provisions] (received 7 August 2009)

18. Community Affairs Legislation Committee--Interim report--Health Legislation Amendment (Midwives and Nurse Practitioners) Bill 2009 and related bills (received 7 August 2009)

(b) Government response to parliamentary committee report

1. Parliamentary Joint Committee on Corporations and Financial Services--Report--Aspects of the regulation of proprietary companies (received 16 July 2009)

2. Finance and Public Administration Committee--Report--Transparency and accountability of Commonwealth public funding and expenditure--Final response (note: interim response presented on 23 February 2009) (presented to the President on 10 August 2009, 10.26 am).

(c) Ministerial statement

Approval of exemption to guidelines on campaign advertising by Australian Government departments and agencies (received 29 June 2009)

(d) Government documents

1. National Health and Medical Research Council (NHMRC)--NHMRC Licensing Committee--Report on the operation of the Research Involving Human Embryos Act 2002 for the period 1 October 2008 to 31 March 2009 (received 30 June 2009)

2. National Health and Medical Research Council (NHMRC)--Report on the operation of the strategic plan 2007-09 (received 30 June 2009)

3. Military Superannuation and Benefits Scheme (MSBS) and Defence Force Retirement and Death Benefits Scheme (DFRDB)—Report on long-term costs carried out by the Australian Government Actuary using data to 30 June 2008 (received 30 June 2009)

4. Gene Technology Regulator—Quarterly report for the period 1 January to 31 March 2009 (received 30 June 2009)

5. Local Government (Financial Assistance) Act 1995--Report for 2006-07 on the operation of the Act (received 8 July 2009)

6. Foreign Investment Review Board--Report for 2007-08 (received 6 August 2009)

7. Australian River Co. Limited--Report for 1 December 2007 to 30 November 2008 (received 6 August 2009)

8. Australian Agency for International Development (AusAID)--Office of Development Effectiveness--Annual review of development effectiveness 2008 (presented to the President on 10 August 2009, 11.03 am).

(e) Reports of the Auditor-General

1. Report no. 48 of 2008-09--Performance audit--Planning and approval of Defence major capital equipment projects: Department of Defence (received 30 June 2009)

2. Report no. 1 of 2009-10--Performance audit--Representations to the Department of the Treasury in relation to Motor Dealer Financing Assistance: Department of the Treasury and Department of the Prime Minister and Cabinet (received 4 August 2009)

(f) Returns to order

1. Productivity Commission--Carbon Pollution Reduction Scheme (received 6 August 2009) [Note: motion of Senator Xenophon agreed to 25 June 2009.]

2. Carbon Pollution Reduction Scheme--Treasury modeling--Economics--Additional information to above entry (received 6 August 2009) [Note: motions of Senator Cormann agreed to 4 February and 11 March 2009, and Senator Xenophon agreed to 25 June 2009.]

(g) Statement of compliance and letter of advice relating to Senate orders

1. Statement of compliance relating to indexed lists of files:

Commonwealth Ombudsman (received 5 August 2009)

2. Letter of advice relating to lists of contracts:

Environment, Heritage, Water and the Arts portfolio agencies (received 5 August 2009)

Ordered that the committee reports be printed.

The government responses read as follows—

Commonwealth Government Response to the Parliamentary Joint Statutory Committee on Corporations and Securities

Report on Aspects of the regulation of proprietary companies

Government response to the report of the parliamentary joint Statutory committee on corporations and Securities —Aspects of the regulation of proprietary companies

Background

On 27 January 2000, the then Minister for Financial Services and Regulation, the Hon Joe Hockey MP, asked the then Parliamentary Joint Statutory Committee on Corporations and Securities (the Committee) —now known as the Parliamentary Joint Committee on Corporations and Financial Services —to examine certain matters arising from the thresholds used to differentiate between the financial reporting obligations of small and large proprietary companies (known as the ‘small/large’ test). The Committee’s report, entitled Aspects of the Regulation of Proprietary Companies, was tabled in the Parliament on 8 March 2001.

The Committee’s report contains four recommendations, the principal recommendation being the removal of the thresholds contained in section 45A of the Corporations Act 2001 (the Corporations Act) used to define a proprietary company and the reinstatement of the previous exempt and non-exempt proprietary company regime.

Under the approach recommended by the Committee, all non-exempt proprietary companies would be required to lodge audited financial statements with ASIC. The other recommendations contained in the report related to requirements for directors of proprietary companies to sign and lodge a declaration of solvency with their annual reports, the application of accounting standards and audit requirements.

The report also includes a minority report by the then Labor Party members of the Committee which contains four recommendations. These recommendations are that the existing small/large test be continued, removing the grandfathering provision or making it subject to a sunsetting provision, requiring each proprietary company to inform ASIC each year whether it is small or large and to require ASIC to collect statistics on the number of companies that are small or large.

The Government’s response to each of these recommendations is outlined below.

RECOMMENDATION 1

The previous distinction between exempt and non-exempt proprietary companies be reinstated, to replace section 45A of the Corporations Act.

The Government does not support this recommendation.

The current financial reporting requirements were introduced in 1995 by the Keating Government. These changes removed the distinction between non-exempt and exempt companies and replaced it with a threshold test. Since that time, the policy of successive Governments has been that financial reporting requirements should generally be based on an entity’s economic significance rather than ownership characteristics. Economically significant proprietary companies have considerable influence on the economy and community more broadly and as such should be required to prepare audited financial statements.

In 2007, the thresholds used to define a large proprietary company were increased as part of a range of amendments made to the Corporations Act by the Corporations Legislation Amendment (Simpler Regulatory System) Act 2007 (SRS Act). The amendments resulted in the monetary thresholds (revenue and assets) being increased by 150 per cent to ensure that only those companies that are of genuine economic significance continue to be required to prepare financial statements. It is estimated that this amendment reduces the number of proprietary companies with financial reporting obligations by 35 per cent.

The amendments contained in the SRS Act also allow for changes to the thresholds to be prescribed by regulation to enable the thresholds to be more readily adjusted in the future. This amendment will ensure that the thresholds continue to accurately reflect genuine economic significance during periods of sustained economic growth.

The Government supports the threshold criteria used to define large proprietary companies and determine their financial reporting obligations.

RECOMMENDATION 2

All directors of proprietary companies be required to sign and lodge a declaration of solvency with their annual reports.

The Government does not support this recommendation.

The Corporations Act already prohibits company directors from engaging in insolvent trading (section 588G) and there are penalties for any directors who breach these provisions.

In addition, introducing a requirement for directors of proprietary companies to sign and lodge a declaration of solvency with their annual reports would be a departure from the policy principle, underlying the reforms in the seventh phase of the Corporate Law Economic Reform Program (CLERP 7), that companies should only be required to notify ASIC when a change in details has occurred.

The CLERP 7 reforms removed the requirement for companies to lodge an annual return with ASIC. However, companies are still required to notify ASIC of changes in particulars, as they occur, within the statutory period. Companies are also required to conduct an annual review. As part of the annual review, companies are required to check the information contained on an extract of particulars issued by ASIC, ensuring they are correct and up-to-date. Again, companies are only required to notify ASIC if a change occurs.

Directors are still required to pass an annual resolution of solvency under section 346 of the Corporations Act, before the due date for payment of the annual fee. Failure by directors to resolve each year that the company is solvent is an offence. As such, the Government believes that the current requirements are sufficient without imposing any further regulatory burden on company directors to indicate the company’s solvency.

RECOMMENDATION 3

In preparing financial statements, reporting and non-reporting entities apply all the recognition and measurement requirements of the Accounting Standards.

The Government supports this recommendation.

In July 2005, the Australian Securities and Investments Commission (ASIC) issued a Regulatory Guide entitled Reporting Requirements for Non-Reporting Entities [RG 85] to assist non-reporting entities prepare their financial reports. The Regulatory Guide states that all non-reporting entities, which are required to prepare financial statements in accordance with Chapter 2M of the Corporations Act, should comply with the recognition and measurement requirements contained in the full suite of accounting standards. These requirements supersede ASIC’s Information Release [00/025], released in July 2000, which provided guidance on how to apply the ‘reporting entity’ test and the reporting obligations for non-reporting entities, including compliance with the recognition and measurement requirements.

In addition, the Australian Accounting Standards Board (AASB) is currently considering the potential application in Australia of a proposed International Financial Reporting Standard (IFRS) specifically developed by the International Accounting Standards Board (IASB) to meet the financial reporting needs of private entities. This work also includes an assessment of the reporting entity concept.

During 2007, the AASB released for public consultation a revised differential reporting framework for Australia. The AASB’s constituents expressed mixed views on the proposals and, in November 2007, the AASB informed the IASB that it was considering how it might use the IFRS for private entities in its differential reporting regime. The AASB indicated that the extent to which it might use an IFRS for private entities will depend on a number of domestic factors and the extent to which the final IFRS for private entities standard meets the needs of Australian constituents. The IASB is expected to issue its final standard during the fourth quarter of 2008.

RECOMMENDATION 4

All company financial statements, which are required to be lodged with ASIC, should be required to be audited.

The Government supports this recommendation.

The Government recognises that audits improve the reliability of financial statements. Audits represent the principal external check on the integrity of financial statements. As such, audited financial statements are an important element of effective corporate governance.

Under the Corporations Act, companies, registered schemes and disclosing entities are required to prepare financial statements which have been audited by a registered company auditor. ASIC can provide, in limited circumstances, relief to proprietary companies from this requirement if the audit imposes an unreasonable burden on the entity. The Government endorses these requirements.

GOVERNMENT’S RESPONSE TO RECOMMENDATIONS IN MINORITY REPORT BY LABOR PARTY MEMBERS OF THE COMMITTEE

RECOMMENDATION

The minority report recommended that the existing ‘small/large’ test continue for the time being.

The Government supports this recommendation.

In 1995, the basis for determining the financial reporting requirements of proprietary companies was changed from one based on the entity’s ownership characteristics to one based on its economic significance. Economically significant proprietary companies have considerable influence on the economy and community more broadly and as such should be required to prepare audited financial statements.

In 2007, the thresholds used to define a large proprietary company were increased by 150 per cent to ensure that only those companies that are of genuine economic significance continue to be required to prepare financial statements.

The Government supports the threshold criteria used to define large proprietary companies and determine their financial reporting obligations.

RECOMMENDATION

The minority report recommended that the Government examine the consequences of removing the grandfathering provisions or making it subject to a sunsetting provision.

The Government supports this recommendation.

The grandfathering provisions apply to those proprietary companies which were not required to disclose financial information under the ownership-based test that applied before the threshold test was introduced in 1995. Under these provisions, the grandfathered exempt proprietary companies are required to prepare an audited financial report but are exempt from the requirement to lodge that report.

The relief granted to grandfathered exempt proprietary companies creates an inconsistent regulatory framework for proprietary companies that potentially gives grandfathered exempt proprietary companies an unfair competitive advantage. Providing relief to these companies also conflicts with the policy of successive Governments that proprietary companies with economically significant operations should be required to lodge financial reports.

In 2006, as part of the Corporate and Financial Services Regulation Review, views of stakeholders were sought on a proposal that the relief given to grandfathered exempt proprietary companies be repealed so that these entities are subject to the same requirements as other proprietary companies. Many stakeholders were not supportive of this proposal at that time and the proposed amendment did not proceed.

The Government proposes that the consequences of either removing the grandfathering provisions or making them subject to a sunsetting requirement should be re-examined in conjunction with any future proposals to amend the financial reporting requirements of the Corporations Act.

RECOMMENDATION

That the Corporations Act be amended to require each proprietary company to report annually to ASIC that the directors have considered whether the company is large or small for its last financial year, and to state whether the company was small or large.

The Government does not support this recommendation.

Introducing a requirement for directors of proprietary companies to report annually to ASIC that they have considered whether their companies are large or small would be a departure from the policy principle, underlying the CLERP 7 reforms, that companies should only be required to notify ASIC when a change in details has occurred.

Companies are no longer required to lodge annual returns and an annual notification requirement as to whether a proprietary company is large or small would impose a new administrative requirement on approximately 1.5 million companies. ASIC has indicated that approximately 11,000 proprietary companies prepared financial reports under Chapter 2M of the Corporations Act for financial years that ended during the 12 months to 30 June 2007.

In these circumstances, the Government believes that ASIC already has reliable information about the number of large proprietary companies and that it would impose a significant regulatory burden on the corporate community to require every proprietary company to advise ASIC each year whether the company is large or small.

RECOMMENDATION

The minority report recommended that ASIC continue to collect and review, to the best of its resources, the statistics of the kind presented to it by the Committee and also, if the previous recommendation is adopted, the number of companies which state they are large or small each year.

The Government supports this recommendation.

ASIC is able to estimate the number of large proprietary companies on the basis of the number of proprietary companies that lodge annual reports and the number of former exempt proprietary companies that have lodged a notice indicating that they are taking the relief from the requirement to lodge their reports.

SENATE STANDING COMMITTEE ON FINANCE AND PUBLIC ADMINISTRATION COMMITTEE REPORT

“TRANSPARENCY AND ACCOUNTABILITY OF COMMONWEALTH PUBLIC FUNDING AND EXPENDITURE”

(MARCH 2007)

Introduction

On 1 March 2007 the Senate Finance and Public Administration Committee’s (SFPAC) report on the inquiry into the Transparency and accountability of Commonwealth public funding and expenditure was tabled.

A formal government response to the report’s 19 recommendations had not been finalised by the time of the Federal election in November 2007, and the Minister for Finance and Deregulation, the Hon Lindsay Tanner MP, wrote to the Committee’s Chair (Senator Helen Polley) in April 2008, providing an interim response and noting that many of the recommendations were consistent with the Government’s Operation Sunlight reform agenda for Budget transparency and accountability that was being progressively introduced.

The interim response also noted that a final response to the SFPAC report would be provided after the Government considered a review of Budget transparency and the Operation Sunlight reform agenda by then Senator Andrew Murray, given the similar nature of the subject matter.

Mr Murray conducted his review in 2008 and after consideration the Government released Mr Murray’s report, and a formal government response to the report, on 9 December 2008. Copies of the report, the government response and a revised Operation Sunlight policy document can be found on the website of the Department of Finance and Deregulation at www.finance.gov.au.

This formal response to the SFPAC report takes into account both the report of Mr Murray and the Operation Sunlight reform agenda. The Government is supportive of the Committee’s intent to improve the disclosure of information about the use of public resources and will continue to progress its reform agenda in consultation with the Parliament.

Proliferation of Funding Sources

Recommendation 1 - The Committee recommends that the government produce and table with the annual budget documents a document that sets out the past and expected expenditure from all Special Appropriations. The data in that document should be set out against the programs that are funded from the relevant appropriation.

Government Response:

Agreed - The Government is already committed to producing data on special appropriations and introduced consolidated agency information in Budget Paper No. 4 as part of the 2008-09 Budget in line with election commitments under the Operation Sunlight reform agenda.

In addition, program level information has been included in agency Portfolio Budget Statements with effect from the 2009-10 Budget. The Statements, which are tabled in Parliament as part of the annual Budget process, include details of annual and special appropriation sources for programs for the Budget and Forward Estimates period.

Recommendation 2 - The Committee recommends that the Government implement a system of review for standing appropriations to ensure that access to the CRF is withdrawn when no longer required and to ensure that standing appropriations are subject to periodic government and parliamentary review

Government Response:

Noted - The Government agrees that Standing Appropriations should be regularly reviewed, and is considering including formal review clauses in special appropriation legislation, requiring governments to review and report to Parliament on a periodic basis on the continuing need for the legislation and whether the existing focus of the legislation remains valid.

Recommendation 3 - The Committee recommends that the government ensure that where transfers of amounts between different forms of appropriation occur, that the transfers be highlighted in the reporting documents. Because the reporting of these events in agencies’ financial statements may not occur until well after the event, these transfers should be documented and tabled as they occur. In making this recommendation the Committee is aware that there might be many such transfers and that there could therefore be practical difficulties in the timely provision of the data. The Committee therefore recommends that Finance consider the practical implications of the above recommendation and report to the Committee on this matter this financial year.

Government Response:

Agreed in part - The appropriation tables in the notes to the financial statements already require disclosure of movements of appropriation by outcome. This information has been enhanced with the introduction of the agency resource statements in Portfolio Budget Statements, Portfolio Additional Estimates, and Annual Reports from the 2008-09 reporting period.

Increasing the frequency of reporting as suggested is impractical, considering this information is already provided in the resource statement at the time of Budget, Additional Estimates and in the Annual Report.

Recommendation 4 - The Committee recommends that the central role in the management of net appropriations should be returned to the Appropriation Acts so as to ensure that these significant transfers of funds are fully transparent to the Parliament. In making this recommendation the Committee is aware that the management of net appropriations is complicated and that the Department of Finance and Administration is investigating other options. If a procedure other than returning the central role to the Appropriations Acts is proposed, the Committee would expect that the Parliament and its committees would be consulted. In particular, the Committee would expect Finance to report to it on any proposed alternative approach this calendar year.

Government Response:

Agreed in principle - The Government has simplified and standardised net appropriation arrangements (now called ‘relevant agency receipts’) by making net appropriations subject to regulation rather than an Act of Parliament, prescribing the range of receipts that may be retained by agencies as increased departmental items to spend in operation of their departmental activities. This was agreed to by the Parliament in the Financial Framework Legislation Amendment Bill (No.1) 2007, which took effect on 1 July 2008. The use of regulation has been assessed as the most effective means of implementing improved arrangements and provides the Parliament with the ability to disallow the regulation if it does not agree. Agencies are required to individually report estimated amounts in their Portfolio Budget Statements and actual amounts in their annual financial statements.

Recommendation 5 - The Committee recommends that agencies report the amounts of their unspent appropriations and the reasons for the under spend to Finance at the end of each financial year and that the government tables in Parliament a consolidated report on the amount and reasons for the under spend within six months of the end of the relevant financial year. The Committee further recommends that unspent appropriations be returned to the CRF unless the Finance Minister determines that there is good cause for the funds to be retained.

Government Response:

Agreed in part - Agencies’ Annual Reports include information on their performance against targets and will be supplemented by the inclusion of resource statements, beginning with the 2008-09 Annual Reports, providing information on the available resources and the purposes to which they have been applied. This will be further improved from 2009-10 when Annual Reports will also include information at the program level, permitting a more visible link between planned performance and actual results. The Government currently discloses at the whole of government level estimates and actual results in the Final Budget Outcome document released within three months of the end of the financial year. The production of a separate report on the amount and reasons for under spends is therefore not supported as current publications and scheduling already provide this information to Parliament.

Access to unspent administered appropriations is revoked after the finalisation of each financial year in accordance with section 11 of the relevant Appropriation Acts. Departmental appropriations are to be more closely tied to the years in which obligations fall due as a result of the introduction of net cash funding arrangements. The first stage of these arrangements has been introduced for collecting institutions for 2009-10 with other agencies in the General Government Sector to move to the arrangements in 2010-11.

Recommendation 6 - The Committee recommends that unless the Government can propose another mechanism that would overcome the accountability and transparency issues raised in connection with the carry over of appropriations it should discontinue the appropriation of funds to agencies for the purpose of depreciation.

Government Response:

Agreed - The Government has decided to cease the funding of depreciation and other non-cash items and introduce appropriation of General Government Sector agencies on the basis of net cash requirements. This will be implemented from the 2009-10 Budget for collecting institutions, which will be provided with a collections development budget for heritage and cultural assets and from 2010-11 for other General Government Sector agencies. This will provide agencies in the General Government Sector with the funding they require within a financial year rather than providing funding for items which will not occur until a future date, sometimes for years. It will be transparent that the appropriations provided to agencies are for their use within a financial year including any carryover between years.

Tax Expenditures, AFM, GST and ordinary annual services

Recommendation 7 - The Committee recommends that the State and Territory jurisdictions provide to the Commonwealth comprehensive annual statements of the purposes and expenditures of GST revenues to enable their incorporation into Budget Paper No. 3.

Government Response:

Not agreed - The Federal Financial Relations Act 2009, which implements financial arrangements of the Intergovernmental Agreement on Federal Financial Relations, provides for all GST revenue to be distributed to the States and Territories (the States) and that this revenue can be used by the States for any purpose. Consequently, GST revenue forms part of each State’s consolidated revenue from which all state expenditures are funded.

The Australian Government cannot impose conditions on the States’ expenditure of GST revenue without gaining the States’ agreement to amend the Intergovernmental Agreement and subsequently amending the Federal Financial Relations Act 2009.

Annual state budgets provide the public with detailed estimates of how each State will allocate its expenditure. State governments are accountable to their parliaments and electorates for these budget decisions.

Recommendation 8 - The Committee recommends that the Senate continue to seek clarification from the Government as to which items the Government believes should be included in the different appropriation bills. The Senate should then form a view as to the appropriateness of the split. When any differences are resolved to the satisfaction of the Senate, the Department of Finance and Administration should be required to monitor and enforce the split.

Government Response:

Noted.

Recommendation 9 - The Committee recommends that the Standing Committee on Appropriations and Staffing should report expeditiously on its negotiations with Government in relation to the appropriate split of items of expenditure in the different appropriation bills so that the issue may be considered by the Senate.

Government Response:

Noted. The Government is considering proposals to be put to the Senate to clarify the allocation of items between the appropriation bills. It is expected that the clarification of the Compact of 1965 will address the concerns underpinning this recommendation.

Recommendation 10 - The Committee recommends that the Clerk advise the President of the Senate with respect to concerns about the matters included in periodic Appropriation bills and that the President table a statement accompanying the bills or return the bills to the House of Representatives or to the minister for clarification, elucidation or adjustment.

Government Response:

Noted. Improving transparency and specificity of budget documents

Recommendation 11 - The Committee recommends that a common approach be taken for the Portfolio Budget Statements and that estimates for three forward years be included for departmental and administered items.

Government response:

Agreed - This represents Government policy with agencies’ Portfolio Budget Statements being redesigned for the 2009-10 Budget to include financial and non-financial information on agencies’ programs across the forward estimates period.

Recommendation 12 - The Committee recommends that outcomes be expressed in clear, simple and measurable terms.

Government Response:

Agreed - This represents the Government’s existing policy in relation to agency outcome statements. The Department of Finance and Deregulation has worked with agencies to review their outcome statements in the context of ongoing reform of the financial framework and has issued revised guidance for agencies. The revised outcome statements of agencies have been included in the Appropriation Bills and Portfolio Budget Statements from the 2009-10 Budget.

Recommendation 13 - The Committee recommends that expenditure should be reported at the levels of programs in the budget documents, including in the schedules to the Appropriation Acts.

Government Response:

Agreed in part - Reporting at the level of programs was included in agencies’ Portfolio Budget Statements as part of the 2009-10 Budget, together with more comprehensive information in the Budget Papers. Agencies’ outcome statements in the Appropriation Acts have also been revised to improve the clarity of purpose for which funding is provided. The inclusion of program level information in the schedules to the Appropriation Acts is not supported, as agencies are appropriated on the basis of outcomes.

Recommendation 14 - The Committee recommends that the terms ‘administered’ and ‘departmental’ be defined in the appropriation bills or other appropriate documents.

Government Response:

Agreed - A set of principles were introduced in the Finance Minister’s Orders in 2007, providing greater clarity in relation to the classification of appropriations as departmental or administered. This approach takes into account relevant accounting standards as well as Government’s intentions in relation to the level of agency accountability for management and control of resources and their use.

Recommendation 15 - The Committee recommends that the ongoing process being undertaken to harmonise the accounting standards should continue and should be expedited by the Government setting a deadline for its completion.

Government Response:

Agreed - Harmonised accounting standards for the whole of government and general government sectors were introduced for 2008-09 Budget and have resulted in a significant simplification of the information provided to Parliament in Budget Paper 1.

The Australian Accounting Standards Board (AASB) is the independent body responsible for the development of an approach to harmonising accounting standards at entity level, and the Government will implement the new standard in accordance with any required timeline.

The current timetable for the AASB involves consulting with jurisdictions and other stakeholders and producing a standard on harmonisation at entity level by February 2010. The date of effect for implementation is less certain, however, as reviewing and applying this standard, assuming that it is released in February 2010, will require extensive work by agencies to meet the new standard and to make necessary changes to their financial systems. Implementation of any new standard will be done in accordance with the timeframes set out in the proposed standard.

Recommendation 16 - The Committee recommends that the Government should give consideration to a system for funding depreciation whereby gross capital expenditure would be separately reported and budgeted for as required, with a sub-division of expenditures between asset replacement (i.e. the depreciation component) and asset expansion.

Government Response:

Agreed - The Government has decided to cease funding of depreciation and other non-cash items and introduce appropriation of General Government Sector agencies on the basis of net cash requirements. This has been introduced from the 2009-10 Budget for collecting institutions, who have been provided with a collections development budget for the acquisition of heritage and cultural assets and from 2010-11 for other General Government Sector agencies. This will provide agencies in the general government sector with the funding they require within a financial year rather than providing funding for items which will not be required until a future date, sometimes for years. Changes have been made in the 2009-10 Budget to broaden the range of asset information presented in agencies’ Portfolio Budget Statements and to ensure greater transparency of the appropriations provided to agencies and their use in the acquisition, maintenance, replacement and disposal of assets. Further changes will be considered during 2009 prior to the introduction of net cash arrangements for General Government Sector agencies in 2010-11.

Improving Parliamentary oversight

Recommendation 17 - The Committee recommends that the Senate Standing Legislative and General Purpose Committees report as necessary in their reports on the estimates on the format and contents of the PBS and PAES that are referred to them.

Government Response:

Noted.

Recommendation 18 - The Committee recommends that the Committee Chairs Group examine proposals made by the Auditor-General for measures to assist the Legislative and General Purpose Standing Committees in their consideration of the estimates.

Government Response:

Noted.

Recommendation 19 - The Committee recommends that the Government ensure that future appropriation bills that the Senate cannot amend under the provisions of the Constitution restore the need for any approved expenditure to be legally linked to and connected with a specific outcome or purpose.

Government Response:

Agreed - This represents a statement of current Government policy, and the link between appropriations and activities will be further improved from 2009-10 with the introduction of revised outcome statements for agencies that are more specific and measurable.